The US Federal Reserve (FED) issued a new directive on Monday, which also includes cryptocurrencies. The guide specifically shows the factors that reserve banks will consider. These factors are important when reviewing requests for Fed accounts and payment services. The guidelines establish a three-stage review framework with the level of due diligence to be provided based on the applicant’s level of risk. Here are the details…
- 1 FED announces directive for cryptocurrency companies
- 2 What had happened before in platforms’ quest for regulation?
- 3 Share this:
FED announces directive for cryptocurrency companies
The announcement will apparently bring the Fed one step closer to allowing Wyoming special-purpose custodians (SPDI) such as Custodia (formerly Avanti) and Kraken Bank to access various accounts so they don’t need intermediary banks. The Fed offered to issue guidance for the first time last year by initiating a request for comment process. AmkNews.com As we have also reported, 300 participants made comments during the process. This led to a second public feedback process earlier in the year.
It is broadly similar to the guideline first proposed in 2021. However, the framework has been refined “to ensure equity between non-federally insured agencies authorized under state and federal law.” Non-federally insured entities that do not have a holding company subject to Fed oversight under federal law will be subject to the strictest scrutiny. Financial institutions need a Fed account to access global payment systems.
The guidance will allow the Fed to tailor the evaluation process for access granting based on what type of financial institution is applying. Thus, it will create a multi-layered system. Each layer, in turn, will correspond to a more stringent review process. The following statements were made in the statement made by the FED:
Institutions that engage in new activities and where authorities have developed appropriate supervisory and regulatory frameworks will undergo a more thorough review.
What had happened before in platforms’ quest for regulation?
Both Custodia and Kraken applied for main account access in 2021, shortly before the Fed published its first proposal. Kraken Bank CEO David Knitsky said at the time that the offer was a positive step for his company. “There is nothing new in terms of the factors they include here. Risk for the bank itself, risk for the payment system [ve] risk to the economy. “That’s exactly what the Fed is looking at,” he said.
Both companies received routing numbers earlier this year, an important step in gaining access to main accounts. It’s worth noting, though, that this isn’t necessarily indicative of companies getting access. Custodia, on the other hand, filed a lawsuit with the Fed, alleging that it took longer to decide whether to grant access to the Wyoming firm. It is stated that the company has been waiting for the FED’s decision for exactly 19 months.
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